Software Licensing and Consumer Rights

Posted January 15, 2009, 12:00 p.m.

One of the most controversial issues in the technology field is the issue of software licensing. As you may be aware (though I’m sure many of you are not aware), software companies claim that when they sell you a piece of software they’re not actually selling you anything except a license to use that software. That’s why you get prompted when installing most software to agree to its license terms—often called an End-User License Agreement (EULA)—and these companies claim those license terms equate to a binding contract and you cannot use that software in any way that goes against those terms.

Of course, things aren’t that simple.

The problem for software companies is that there is little or no precedent for their argument. Software is copyrighted work—just like a novel, a CD of music, or a film on DVD—and as such the author/creator of that work has certain rights under copyright law. They have a sole right to the ‘first sale’ of that work or to license that work to others for sale. They have a sole right to create ‘derivative works.’ They have a right to prohibit others from copying and selling (or giving) that copy to others. This is all without serious dispute.

But the recipient of a copyrighted work—the consumer—has rights under copyright law too. They can make as many copies as they want for personal use (e.g., you can photocopy a fragile book to read the copy instead of the original or ‘rip’ a CD to MP3 format to listen to it on your computer) as long as you aren’t selling or distributing the copies. This is called the ‘fair use’ doctrine. They also have a right to sell the original copy of the work under something called the ‘first sale’ doctrine. The author of a work has the right to profit from its sale, but you can then re-sell that work to somebody else later if you want. Of course, if you sell the original copyrighted work, you cannot retain your copies! No selling the CD and keeping the MP3s you made! Getting rid of the copy that gave you the ‘fair use’ rights in the first place terminates your ‘fair use’ rights!

All of these rights, despite the blathering of the software companies, apply to copyrighted software just the same as they apply to music, movies, or books. We have one set of copyright laws, and they don’t delineate between one type of copyrighted work and another. Of course, Congress could change that—since they actually have Constitutional authority to make copyright law—but they haven’t yet.

In other words, if a book included a notice on the front page saying ‘you may not make copies of this book for any purpose, and you must read the book right-side-up, and you must not remove page 176’ you could blithely ignore all those requirements. Once the author has made his money from the sale of that book, you can do whatever you want with it as long as you don’t profit from it and as long as you don’t harm the author’s right to profit from it. You can make a photocopy of the book, read it upside down, and tear out page 176 to your heart’s content. You cannot, however, put scans of the book online for others to download, sell your photocopies, or give copies away.

(It’s worth noting too that you do have some limited rights to excerpt parts of the copyrighted work in your own work, including on the web, under ‘fair use’. The amount excerpted can’t be more than a certain percentage of the total and there are some other limitations. This is not the subject of this piece.)

Likewise, with software, they can say whatever they want in their EULAs but many/most of those requirements are legally invalid. You’ve received a copyrighted work—by legally purchasing it from the copyright owner or [after first-sale] from someone who did—and now have very specific, clear rights to do pretty much whatever you want with it. You can shred the CD to strips and use them to decorate your couch, you can make 44 copies of the CD because you’re paranoid about losing the software, and—yes—you can install the software on multiple computers provided they are all for your personal use.

And if the EULA says you can’t install the software on computers with red power buttons, well, too bad. You can. It’s your copy of the software, and it’s your right to install it on whatever machine(s) you want for personal use. The company that produces the software might refuse to provide support for running their software on computers with red power buttons, which is their right, but they can’t tell you that you can’t do it.

Now, let’s say that you want to sell your red-power-buttoned computer with this hypothetical piece of software on it. You can remove the software from the machine if you want to keep that software for your other computer[s]. You can also sell the original CD that the software came on right along side the computer as a package, but you’d then have to remove the software from any other computer[s] it is on and destroy or dispose of all other copies you have. The only real requirement is that you provide full-disclosure to the buyer that the maker of the software doesn’t support having the software installed on this computer since it has a red power button. You cannot misrepresent what you’re selling, or pretend the software maker approved it.

This isn’t all hypothetical though. Apple Inc.’s Mac OS X operating system includes provisions in its EULA not-unlike those in my example:

The software (including Boot ROM code), documentation and any fonts accompanying this License whether on disk, in read only memory, on any other media or in any other form (collectively the “Apple Software”) are licensed, not sold, to you by Apple Inc. (”Apple”) for use only under the terms of this License, and Apple reserves all rights not expressly granted to you.

[ . . . ]

This License allows you to install and use one copy of the Apple Software on a single Apple-labeled computer at a time. This License does not allow the Apple Software to exist on more than one computer at a time,and you may not make the Apple Software available over a network where it could be used by multiple computers at the same time. You may make one copy of the Apple Software (excluding the Boot ROM code) in machine-readable form for backup purposes only; provided that the backup copy must include all copyright or other proprietary notices contained on the original.

There are many problems with this. First, it is simply untrue that the software is ‘licensed, not sold’—at least, not any more so than with novels or music CDs—without some kind of modification to copyright law. The physical copy you have purchased is a copy that you do, indeed, own from ‘first sale’. By owning that copy, you have certain ‘license’ to use it under copyright law, but that license is not nearly as limiting as Apple would claim. Second, Apple claims that this sale/license limits you to installing only on one computer (wrong!) and only on an ‘Apple-labeled’ computer (wrong!). If I, with the help of hackers on the Internet, figure out how to install a legal copy of Mac OS X on two Dell computers that I happen to own, well, too bad for Apple. They have no right to stop me.

Apple, even more so than other software companies, really hates this. They, after all, make most of their money from selling hardware—computers—not software, and yet it’s the software more than anything else that makes those computers so attractive to buyers. It’s in Apple’s interest to limit you from buying their excellent software and installing it on any generic computer; they want you to buy a Mac. So I can’t really blame them for playing this game, but they might not want to push it in the courts since—if they get a judge that follows the rule of law and significant precedent from other industries dealing in copyrighted material—they will lose.

This court case isn’t hypothetical either. A Florida company called Psystar started selling computers last year pre-loaded with legally-purchased copies of Mac OS X. Since Apple made the ‘first sale’ and received money for the software, Psystar—as the purchaser—had the right to install that software on a non-Apple computer if they could figure out how (which they did). Psystar then has the right to sell that computer, with the Mac OS X software installed, provided the sale includes the original DVD install media and that copy of Mac OS X hasn’t been installed by Psystar on any other machines for their use or (especially) for sale. Psystar’s only real responsibilities to Apple are to buy the software (which they did) and inform the end-users that Apple will not provide support for Mac OS X installed on non-Apple hardware (which they also did).

Psystar’s legal defense so far to Apple’s lawsuit has mostly been questionable gibberish, but they are finally stumbling into the real meat of the case—they bought Mac OS X fair-and-square, and Apple’s right to limit what they do with it mostly ended after that first sale.

Those of us who respect the intent of our copyright laws—which were designed from the beginning to balance the rights of the creator of the work, the rights of the purchaser, and the societal benefits that come from having a wealth of ‘public domain’ works—are watching this case closely. The trend over the last quarter-century has been to continually erode the rights of the end-users and prevent works from ever entering the public domain, all for the benefit of copyright-holding businesses. It’s time to get that pendulum swinging back the other way and restore some balance to our intellectual property system.

Scott Bradford has been building web sites and using them to say what he thinks since 1995, which tended to get him in trouble with power-tripping assistant principals at the time. He holds a bachelor’s degree in Public Administration from George Mason University, but has spent most of his career (so far) working on public- and private-sector web sites. He is not a member of any political party, and brands himself an ‘independent constitutional conservative.’ In addition to holding down a day job and blogging about challenging subjects like politics, religion, and technology, Scott is also a devout Catholic, gun-owner, bike rider, and music lover with a wife, two cats, and a dog.